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I'm in kind of a unique kind of situation here. During my last semester of college (a year ago), I had to have emergency surgery and it resulted in a ton of medical bills that I've slowly been paying off. Prior to this, my credit was pretty solid, but for some reason that even the mortgage broker can't seem to explain, the medical collections have brought me down big time.

I have a regular W2 income. My husband is self-employed and he tends to put his money back into his business or into rental property, so he cannot show much income on paper. His credit is average.

I have student loans and the medical debt, but otherwise we are fairly low in debt. He owns 3 houses and only has a small equity loan left to pay on the one that's currently rented out. I own land and he also has a lot of land available.

We would like to purchase a house together, to live in. The one we're currently in is paid off, but small (and we have 3 kids), so we plan to rent it out.

Now, it's been a LONG time since I had to finance a house, so I'm not at all sure how things work now. We have 3 options:
1) Buy a fixer-upper for less than $100K that can pass inspection but needs work (around $90K)
2) Buy a fixer upper that can't pass inspection (around $90K)
3) Build on our own land (Around $130K)
4) Buy a ready made house. (Around $150K)

The people we've been working with to finance us have been pretty vague on details--I initially planned to finance it myself but the credit problems have nixed that. Selling any of the houses is not an option, but we would consider refinancing if it makes sense.

Can anyone help me reason through some of this? Quite frankly, it all seems overwhelming just finding a place to start.

Member Summary
Most Recent Posts
Thank you, That definitely hits home. The kids and I moved from a 3 bedroom rental into his 3 bedroom home and most of ... (more)

dyslexiateechur (Dec. 29, 2012 @ 1:31p) |

Go back and look at what SIS said to do about your credit. You came here for information but are ignoring some of the b... (more)

powellm (Dec. 29, 2012 @ 7:40p) |

That's what a mortgage IS.

jaytrader (Dec. 29, 2012 @ 8:30p) |


Bad credit because you have active collections that you can not afford to pay and your first thought it that you need to buy a new home?

Actually they've been paid off, for the most part but they're still on my credit, but thanks for being so helpful!

dyslexiateechur said:   He owns 3 houses and only has a small equity loan left to pay on the one that's currently rented out.

So 2/3 of his rental empire is vacant? That doesn't bode well for adding your current home to the mix.

dyslexiateechur said:   Actually they've been paid off, for the most part but they're still on my credit, but thanks for being so helpful!

Considering you don't really have a question, not sure what you wanted. You want a new house, but you have bad credit and your husband does not have enough documented income. You said you have been slowing paying them off, now they are "for the most part" paid off. I assume you also have little to no down payment based upon that?

My advice is that you are currently in no position to be financing a mortgage, MAYBE if you were selling your current paid off home, but since you want to keep that one as well getting a loan is going to be rather difficult.

You have 2 problems: your poor credit and husbands income documentation.

Theres no quick fixes for either of those. Nowadays if you want financing then you'll need decent credit and sufficient documented income. If it was 2006 you wouldn't have a problem but now banks actually check to see if people can actually repay mortgages.

DO you know what your actual credit scores are? How bad is bad?
Whats the individual and household incomes?

No, we live in 1, 1 is rented out, and 1 is at the tail end of a renovation.

I have been slowly paying them off. I started off with 12 bills and all but 3 are paid off. The 3 I have left are the 3 biggest though (about 50% of the initial total). I think that's actually not bad considering it's only been a year and I've only been working 7 months. We live in a place that has a pretty big shortage of rental properties, so we plan to rent out the one we're currently living in also--probably for about $1200-$1500 a month, which will be more than the mortgage. And we can do about $20K down, but if we need to fix it up, then it would be a problem.

My question is about looking beyond regular loans or figuring out the best way to go about this. Or even if there IS a way to do this. He is kinda favoring just adding on to the existing house, but I still think that's going to be a temporary fix and a waste of money.

dyslexiateechur said:   I'm in kind of a unique kind of situation here. During my last semester of college (a year ago), I had to have emergency surgery and it resulted in a ton of medical bills that I've slowly been paying off. Prior to this, my credit was pretty solid, but for some reason that even the mortgage broker can't seem to explain, the medical collections have brought me down big time.

I have a regular W2 income. My husband is self-employed and he tends to put his money back into his business or into rental property, so he cannot show much income on paper. His credit is average.

I have student loans and the medical debt, but otherwise we are fairly low in debt. .

...and I don't know why the credit card company declined my application because of too many inquiries - I don't have any inquiries (except for the 4 from last week...). And they complain about my missed payments, when I always pay on time (well, except for the payments I missed a couple months ago)...

You need to read what you wrote - you have "tons of medical bills", collections (plural), a husband with no income, and student loans. Don't pretend no one can explain why your score is low and you are having problems getting a loan.

If you have all this equity in various houses and land, why aren't you just getting an equity loan on one of those? Your 3 options (which you then proceed to list 4 options) have nothing to do with financing, they're just the type of house you want to walk into.

dyslexiateechur said:   No, we live in 1, 1 is rented out, and 1 is at the tail end of a renovation.

I have been slowly paying them off. I started off with 12 bills and all but 3 are paid off. The 3 I have left are the 3 biggest though (about 50% of the initial total).

Sorry, but paying off 50% of the balance isn't close to being mostly paid off,..


We live in a place that has a pretty big shortage of rental properties, so we plan to rent out the one we're currently living in also--probably for about $1200-$1500 a month, which will be more than the mortgage.
Wait, I thought you just said this home is paid off? You could rent it out for $1 and it should be for more than the mortgage....

Either you are ridiculously incompetent, or you need to start thinking about what you are typing before you type it - we don't know what you ment to say, only what you actually did say.

Your position is not that unique. There of tons of people with bad credit and limited income who want to buy a bigger house.

jerosen said:   DO you know what your actual credit scores are? How bad is bad?
Whats the individual and household incomes?


I don't know the actual numbers. When I did the paid equifax credit scorer, it said 670, but the lady at the mortgage company is saying it's showing below 600 for her--she even said she couldn't figure out why based on looking at my credit history. She said his is "just fine".

My income is $75K, W-2. His income is a lot more complicated....he actually makes pretty good money but it's all over the place in various funds and real estate so I don't really know what his personal income is (We just got married in 2012 so I haven't filed taxes with him yet.), but I'm assuming it's just going to be beyond complicated so I'm not counting it.

Glitch99 said:   
..
We live in a place that has a pretty big shortage of rental properties, so we plan to rent out the one we're currently living in also--probably for about $1200-$1500 a month, which will be more than the mortgage.
Wait, I thought you just said this home is paid off? You could rent it out for $1 and it should be for more than the mortgage....

Either you are ridiculously incompetent, or you need to start thinking about what you are typing before you type it - we don't know what you ment to say, only what you actually did say.



I interpreted her as meaning that they could rent out their current house for 1200-1500 which would cover the future mortgage on the new prospective house they are thinking of buying.

First thing you need to do is clean up your credit , that means disputing collections and suing collectors till they remove those marks

See creditboards.com and read up there for a step by step how to do this

Next is find a good mortgage broker who works with many lenders and can get you approved . FHA takes as little as - 580 credit score so you can do it

dyslexiateechur said:   jerosen said:   DO you know what your actual credit scores are? How bad is bad?
Whats the individual and household incomes?


I don't know the actual numbers. When I did the paid equifax credit scorer, it said 670, but the lady at the mortgage company is saying it's showing below 600 for her--she even said she couldn't figure out why based on looking at my credit history. She said his is "just fine".

My income is $75K, W-2. His income is a lot more complicated....he actually makes pretty good money but it's all over the place in various funds and real estate so I don't really know what his personal income is (We just got married in 2012 so I haven't filed taxes with him yet.), but I'm assuming it's just going to be beyond complicated so I'm not counting it.



So is the mortgage company working on an application? If they pulled your credit then did they approve you or not?


Either way I'd ask her for a copy of the credit scores she pulled. If they deny you then they have to give you the scores. I'd also check your full credit reports to make sure everything there is accurate. You can get your full credit reports (reports but not scores) via annualcreditreport.com
Its possible the difference between 600 and 670 is due to different credit bureaus. There are often differences or inaccuracies between the 3 bureaus.
The exact scores or reasons why one shows as 600 probably won't help you much here. If theres an inaccuracy you won't get it fixed fast. You should of course report any inaccuracy but the credit bureaus don't fix stuff fast.

dyslexiateechur said:   I don't know the actual numbers. When I did the paid equifax credit scorer, it said 670, but the lady at the mortgage company is saying it's showing below 600 for her--she even said she couldn't figure out why based on looking at my credit history. She said his is "just fine".

My income is $75K, W-2. His income is a lot more complicated....he actually makes pretty good money but it's all over the place in various funds and real estate so I don't really know what his personal income is (We just got married in 2012 so I haven't filed taxes with him yet.), but I'm assuming it's just going to be beyond complicated so I'm not counting it.


You would also need all the collections to be paid off before anyone would think of writing it (and still need down payment money). I bet if she thought long and hard she could figure out why your score is so low (lots of active collections).

Edit: score-wise paid and unpaid collections are about the same, but they want to see them paid before giving out a mortgage.


I interpreted her as meaning that they could rent out their current house for 1200-1500 which would cover the future mortgage on the new prospective house they are thinking of buying.


Correct.

Sorry, but paying off 50% of the balance isn't close to being mostly paid off,..

Paying off 50% of my balance in 7 months isn't good? I plan on finishing paying off the rest by June.

SUCKISSTAPLES said:   First thing you need to do is clean up your credit , that means disputing collections and suing collectors till they remove those marks

See creditboards.com and read up there for a step by step how to do this

Next is find a good mortgage broker who works with many lenders and can get you approved . FHA takes as little as - 580 credit score so you can do it


I bet banks hate creditboards. They help people have reports that are in no way accurate to their real history.

jerosen said:   


So is the mortgage company working on an application? If they pulled your credit then did they approve you or not?


Either way I'd ask her for a copy of the credit scores she pulled. If they deny you then they have to give you the scores. I'd also check your full credit reports to make sure everything there is accurate. You can get your full credit reports (reports but not scores) via annualcreditreport.com
Its possible the difference between 600 and 670 is due to different credit bureaus. There are often differences or inaccuracies between the 3 bureaus.
The exact scores or reasons why one shows as 600 probably won't help you much here. If theres an inaccuracy you won't get it fixed fast. You should of course report any inaccuracy but the credit bureaus don't fix stuff fast.


They haven't approved or denied yet. She just said it's really strange and she's "working on it".

I did do annualcreditreport.com, and I had to dispute a bunch of stuff not long ago for being inaccurate. (I had one $36 bill that I'd already paid off appear in 6 different places, among other things.

dyslexiateechur said:   
Sorry, but paying off 50% of the balance isn't close to being mostly paid off,..


Paying off 50% of my balance in 7 months isn't good? I plan on finishing paying off the rest by June.

No, its not. There's a difference between "good" and "good progress". You've made great progress - but you need to finish the race before you get credit for winning.

One thing I am pretty confused about:

What are the advantages of trying to do this the traditional mortgage path? It seems like this is probably going to be the most difficult anyway. I was always told not to borrow against the equity unless you absolutely had to.

The thing is you want these collection notations on your credit report completely removed , not just updated to say "paid". This is absolutely essential and you need to go to creditboards and read up and get aggressive . That means start suing. Collectors don't want to show up to your local court and would rather remove than deal with the few percent of people who take the trouble to do this

FHA is not that bad of an option right now. Yes, you pay the equivalent of PMI (FHA calls it something else) but the interest rates on FHA loans are actually just a tad lower then a traditional loan. If you go FHA now...you can get out of the mortgage insurance in 5 years. There are a lot of rumors that in 2013 they are changing this so the mortgage insurance never expires on your loan so you need to do FHA now if you have any plans on doing FHA!

FHA is not the best option however when credit or down payment amounts are not good…FHA is your best option in many of those cases.

They require 3.5% down so you are talking less then $5k in your situation

Glitch99 said:   
Sorry, but paying off 50% of the balance isn't close to being mostly paid off,..


Yeah it is.

50% or more of something is most of it.

dyslexiateechur said:   One thing I am pretty confused about:

What are the advantages of trying to do this the traditional mortgage path? It seems like this is probably going to be the most difficult anyway. I was always told not to borrow against the equity unless you absolutely had to.


THe advantage of traditional mortgage path is generally lower interest.

Borrowing against equity and taking out a mortgage aren't really significantly different. Either way the property is used as collateral. You don't want to borrow against equity in a property to pay off things like unsecured credidt card debt cause there you could lose your house to pay off debts that aren't secured with collateral.

jerosen said:   Glitch99 said:   
Sorry, but paying off 50% of the balance isn't close to being mostly paid off,..


Yeah it is.

50% or more of something is most of it.

"Most" and "majority" are not synonyms.. Most means "near the maximum" - and 50% is nowhere close to the total amount needing to be repaid.

Glitch99 said:   jerosen said:   Glitch99 said:   
Sorry, but paying off 50% of the balance isn't close to being mostly paid off,..


Yeah it is.

50% or more of something is most of it.

"Most" and "majority" are not synonyms.. Most means "near the maximum" - and 50% is nowhere close to the total amount needing to be repaid.


Most and majority can be used synonymously.

see :
http://dictionary.reference.com/browse/most

2.
in the majority of instances: Most operations are successful.
5.
the greatest number or the majority of a class specified: Most of his writing is rubbish.

dude...chill. we're just saying that paying off 50% or little more is really not close to paying it off. no need to bust out a dictionary....

jerosen said:   Glitch99 said:   jerosen said:   Glitch99 said:   
Sorry, but paying off 50% of the balance isn't close to being mostly paid off,..


Yeah it is.

50% or more of something is most of it.

"Most" and "majority" are not synonyms.. Most means "near the maximum" - and 50% is nowhere close to the total amount needing to be repaid.


Most and majority can be used synonymously.

see :
http://dictionary.reference.com/browse/most

2.
in the majority of instances: Most operations are successful.
5.
the greatest number or the majority of a class specified: Most of his writing is rubbish.

^ Nothing needs chilling. Its a tangential semantics argument and using a dictionary is pretty appropriate. I didn't pull a gun...


(edit, course I have to hit edit to fix my incorrect spelling of the word semantics)

WhiteGuy said:   FHA is not that bad of an option right now.

Depends.

OP is concerned about just credit score, but off the top of my head there's also the problems of what state she's in (she wants the mortgage in her name only-is she in a community prop state?), how much in collections are actually open, what's her front and back end ratios (and whether she'll be able to count any of the rental income, if that was the plan), what/ how many lines of other open credit does she have and for how long has she had them, when were these delinquencies and how long ago were they and the most recent delinquency, how long has she been employed for/what went to college for/has transcripts...

And yes, you can get an FHA down to a 580, but you have to find someone who'll do it. Some do, yes, but you have to find them.

The credit scores varied because the scores the mortgage cos use are different than the score the OP pulled. It's all about what version that is pulled, across all 3 boards, OP. Only the mid-score is used as well. And collections are only a part of what brings down your score. We don't know what your AVG age of accts are, what lines of credit you have, what's your utilization, and on and on.

Best advice was to go to creditboards. Learn how to clean up your reports, raise your scores, and then go to the mortgage board to learn about mortgages.

Quikboy4 said:   Your position is not that unique. There of tons of people with bad credit and limited income who want to buy a bigger house.Maybe it is "kind of unique" (Whatever that is. Is that like "kind of pregnant"?)

OP, out of the, at least, 5 properties that you've indicated you and your husband own or have "available",(3 rentals, your land, and his "a lot of land available"), how did you guys acquire all of these? Meaning, besides the one you've already said has a mortgage, did you not finance all or most of those purchases, or were they all purchased with cash, or inherited?

Assuming you guys must have some familiarity with financing real estate transactions, what's changed this time? Is it just your debt/lower score, banks higher underwriting standards, ???

You mentioned your hesitance to pull equity from existing properties based on old advice. I've often heard it suggested that you shouldn't borrow against your home in order to buy more investment properties, but can't recal hearing the reverse. I'm not a real estate expert, but aside from some probable tax implications on which others would be more knowledgeable than myself, I don't see the big difference between borrowing against an existing property vs. the new one. Either way you're leveraging your purchase through debt.

dyslexiateechur said:   
My income is $75K, W-2. His income is a lot more complicated....he actually makes pretty good money but it's all over the place in various funds and real estate so I don't really know what his personal income is (We just got married in 2012 so I haven't filed taxes with him yet.), but I'm assuming it's just going to be beyond complicated so I'm not counting it.

Hate to break it to you, but it probably leans closer to the side of non-existent rather than complicated.

Quick and easy advice -- wait 12 months before trying to buy a new home.

You'll be in a much better position then --
* bad debts paid off 100% in Jun 2013, then six months of clean sailing.
* your property now under renovation will be complete and will have ~9 months of rental income history
* you will have saved up a larger down payment
* you will have time to sue to get the collections reports purged from your credit file
* hubby can report "income" on his 2012 tax return, strengthening your application.
* you'll be a strong mortgage applicant, which means you can get a 30 year fixed at under 4%, which is almost interest-free.

If ya'all can shoehorn yourselves into your current house for another year, everything will be easier for you in Dec 2013. Treat the kids to holidays, get a sitter and take hubby out for a weekend getaway, and take some time to shop for the exact house you want, in the exact neighborhood you want.

You need to know where you are actually starting from with your credit score
www.creditkarma.com & www.creditsesame.com

It sounds like your mind is set on buying another property though. If this is the case, personally I would recommend an equity line from the current properties. Should be easy enough to do. Especially if you speak with the commercial lenders who will be able to take multiple properties and pool them together as collateral.

I discourage you from buying bigger than your means though. My family of 4 lives in a 2 bedroom 850 sq/ft apartment. I know it's not easy, but sometimes it's much more beneficial in teaching your children how to adapt themselves, rather than finding a new environment every time the grass is a little greener.

OP topic & justifications are ridiculous. Unless both her & husband had strokes/amnesia & can't remember how they've acquired/financed the 4 or 5 pieces of real estate they own.

dbond79 said:   OP, out of the, at least, 5 properties that you've indicated you and your husband own or have "available",(3 rentals, your land, and his "a lot of land available"), how did you guys acquire all of these? Meaning, besides the one you've already said has a mortgage, did you not finance all or most of those purchases, or were they all purchased with cash, or inherited?

Assuming you guys must have some familiarity with financing real estate transactions, what's changed this time? Is it just your debt/lower score, banks higher underwriting standards, ???

You mentioned your hesitance to pull equity from existing properties based on old advice. I've often heard it suggested that you shouldn't borrow against your home in order to buy more investment properties, but can't recal hearing the reverse. I'm not a real estate expert, but aside from some probable tax implications on which others would be more knowledgeable than myself, I don't see the big difference between borrowing against an existing property vs. the

new one. Either way you're leveraging your purchase through debt.


I bought my homes the old fashioned way....bought one, sold it, bought another, etc. the last one was destroyed by Katrina, hence the land.

He does things a lot different from me though. The land is inherited, so he built on it with 50% cash and a small loan. He did most of the work himself. He bought the other two properties with cash and the mortgage was for a renovation.

He wants to build another house himself with cash. The thing is, he just doesn't have the time.

So to answer your question, the difference this time is that I'm trying to navigate a different lending industry while being married to someone whose attitude is to work hard and pay cash.

Right now, I'm seriously just thinking about paying off the debt and putting an addition on this house.

OP, be sure to come back and update us in 2017 when you are in foreclosure or are trying to do a short sale.

dyslexiateechur said:   

He does things a lot different from me though. The land is inherited, so he built on it with 50% cash and a small loan. He did most of the work himself. He bought the other two properties with cash and the mortgage was for a renovation.

He wants to build another house himself with cash. The thing is, he just doesn't have the time.


What's he want to do? Right now, he builds or buys, and then rents out. Sounds like he could set himself up with a contractor's license, and then buy fixer-uppers, work on them, and then flip them.

I get a really bad feeling about his business. I suspect it's cash-only and off the books.

I know, right! Because it's completely insane for someone with an advanced degree to want to take on a mortgage payment that would be 1/4th of my monthly income.

But hey, at least y'all did inspire me to put another $1500 towards my medical bills this morning.

Skipping 12 Messages...
dyslexiateechur said:   One thing I am pretty confused about:

What are the advantages of trying to do this the traditional mortgage path? It seems like this is probably going to be the most difficult anyway. I was always told not to borrow against the equity unless you absolutely had to.


That's what a mortgage IS.



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